Sunoco Reports 1Q Results

Sunoco, Inc. has reported net income attributable to Sunoco shareholders of $12 million ($0.10 per share diluted) for the first quarter of 2009 versus a net loss attributable to shareholders of $59 million ($0.50 per share diluted) for the first quarter of 2008. Income before special items was $59 million ($0.50 per share diluted) for the first quarter of 2009.

In a release on May 6, the company noted there were no special items in the first quarter of 2008.

"In a period of significant demand weakness, we were able to earn $23 million in Refining and Supply by effectively optimizing operations in a very difficult market," said Lynn Elsenhans, Sunoco's Chairman and Chief Executive Officer. "In addition, our non-refining businesses earned $57 million in the first quarter. While lower demand and rising feedstock costs limited the contribution from Retail Marketing and Chemicals, Logistics earnings of $30 million reflected another record quarterly result from Sunoco Logistics Partners L.P. and our Coke segment earned $25 million."

Commenting on the Company's outlook, Elsenhans said, "We continue to expect a challenging market for petroleum and chemical products due to ongoing economic weakness and additional global supply. However, the Company remains focused on executing its strategic plan. In the first quarter, we implemented the first phase of our business improvement initiative, and expect to reduce costs by more than $300 million on an annualized basis by year end. Our capital spending for 2009 is now expected to be approximately $200 million lower than planned. This reduction is primarily associated with the deferral of the Middletown, Ohio cokemaking construction project due to permitting delays and the deferral of certain other projects in Refining and Supply. In addition, we successfully completed debt offerings of $250 million by Sunoco, Inc. and $175 million by Sunoco Logistics Partners L.P. during the quarter. Further, in April, we executed a sales agreement for our Tulsa refinery and Sunoco Logistics Partners L.P. issued 2.25 million limited partnership units generating approximately $110 million of net proceeds from the offering. These actions along with our continued operating discipline will assist us in maintaining our financial flexibility and liquidity through 2009."

DETAILS OF FIRST QUARTER RESULTS

REFINING AND SUPPLY

Refining and Supply earned $23 million in the first quarter of 2009 versus a loss of $123 million in the first quarter of 2008. The improvement was due to higher realized margins and lower expenses, partially offset by lower production volumes associated with market-driven rate reductions. During the quarter, we continued to optimize our production slate and run a broader mix of lower-cost crude oil grades resulting in an overall crude utilization rate of 74 percent for the quarter.

During April 2009, Sunoco entered into an agreement in principle to sell its Tulsa refinery to Holly Corp. for $65 million in cash plus inventory. The transaction is subject to customary closing conditions, such as regulatory and other approvals, and is expected to close on June 1.

RETAIL MARKETING

Retail Marketing earned $6 million in the current quarter versus $26 million in the first quarter of 2008. The decrease in earnings was due to lower margins, partially offset by lower expenses. Sales volumes were relatively flat, but margins were negatively affected by periods of rising wholesale prices and a weak demand environment.

CHEMICALS

Chemicals had a loss of $4 million in the first quarter of 2009 versus income of $18 million in the first quarter of 2008. The decrease in results was due primarily to lower margins and sales volumes, partially offset by a $10 million favorable after-tax lower of cost or market adjustment to its polypropylene inventory previously written down in the fourth quarter of 2008. In March 2009, Sunoco permanently shut down its 400 million pounds-per-year polypropylene manufacturing facility located in Bayport, TX.

LOGISTICS

Sunoco's Logistics segment earned a record $30 million in the first quarter of 2009 versus $15 million in the first quarter of 2008. The increase was due to significantly higher lease acquisition results, increased crude oil pipeline and storage revenues, and earnings from a refined products pipeline and terminal system acquired in November 2008.

COKE

Coke earned $25 million in the first quarter of 2009, unchanged compared to the first quarter of 2008. The favorable impact of increased price realizations from coke production at Jewell was essentially offset by higher operating expenses at Haverhill.

CORPORATE AND OTHER

Corporate Expenses - Corporate administrative expenses were $11 million after tax in the first quarter of 2009 versus $17 million after tax in the first quarter of 2008. The decrease was primarily due to the absence of a $9 million unfavorable income tax consolidation adjustment that was recorded in the prior-year period.

Net Financing Expenses and Other - Net financing expenses and other were $10 million after tax in the first quarter of 2009 versus $3 million after tax in the first quarter of 2008. The increase was primarily due to lower interest income and higher interest expense.

SPECIAL ITEMS

During the first quarter of 2009, Sunoco established a $34 million after-tax accrual for employee terminations and related costs in connection with a business improvement initiative; established a $4 million after-tax accrual for a contract loss, employee terminations and other exit costs in connection with the shutdown of the Bayport, TX polypropylene plant; and recorded a $9 million after-tax provision to write down to estimated fair value certain assets primarily in the Refining and Supply business.

Sunoco, headquartered in Philadelphia, Penn., is a manufacturer and marketer of petroleum and petrochemical products.

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